Luxe Capital Group LP v Little Hen Limited

[2025] NZHC 1410

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2025-404-379

[2025] NZHC 1410

BETWEEN

LUXE CAPITAL GROUP LP

Plaintiff/Applicant

AND

LITTLE HEN LIMITED

Defendant/Respondent

Hearing:

On the papers

Counsel:

B Lee/M Lenihan for Plaintiff/Applicant

A Shao/A Ahmed for Defendant/Respondent

Judgment:

30 May 2025

JUDGMENT OF WILKINSON-SMITH J

[Costs]

This judgment was delivered by me on 30/05/2025 at 2 pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors:

Loo and Koo Barristers and Solicitors, Auckland M Lenihan, Auckland

A Ahmed, Auckland A Shao, Auckland

LUXE CAPITAL GROUP LP v LITTLE HEN LIMITED [2025] NZHC 1410 [30 May 2025]

Introduction

[1]    On 19 February 2025 I ordered that a caveat over two properties at 63–65 Victoria Street, Onehunga be removed.

[2]    I also granted injunctive relief restraining the defendant, Little Hen Ltd (LH), and its shareholder and directors or any other associated persons from lodging further caveats over the properties while the plaintiff, Luxe Capital Group LP (Luxe), was the registered owner.

[3]The injunctions remained in place until 28 February 2025.

[4]Luxe applied for indemnity costs against both LH and its director, Kupe Jiang.

[5]    I was not prepared to award indemnity costs on a without notice basis and I ordered that memorandum be filed by 28 February 2025.

[6]    Counsel for Luxe filed a memorandum dated 28 February 2025 setting out the basis for their application for indemnity costs or alternatively, increased costs.

[7]    LH filed a memorandum on 28 February 2025 seeking 15 working days to respond to the memorandum on costs from the Luxe.

[8]Nothing further has been filed by LH.

[9]    On 24 March 2025, counsel for Luxe filed a memorandum requesting that the Court proceed to decide the issue of costs.

Legal principles

[10]   The jurisdiction to award increased or indemnity costs is contained in r 14.6 of the High Court Rules 2016.

[11]   The Court may order a party to pay increased costs in certain circumstances, including where the party opposing costs has contributed unnecessarily to the time and

expense of the proceeding or a step in it by taking or pursuing an unnecessary argument that lacks merit.1

[12]The Court may order a party to pay indemnity costs if:2

(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or

(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or

(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or

(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[13]   In Bradbury v Westpac Banking Corp the Court of Appeal listed circumstances where indemnity costs have been ordered where a party has behaved badly or very unreasonably:3

(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;

(b)particular misconduct that causes loss of time to the Court and to other parties;

(c)commencing or continuing proceedings for some ulterior motive;

(d)doing so in wilful disregard of known facts or clearly established law; or

(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions summarised in French J’s “hopeless case” test.

1      High Court Rules 2016, r 14.6(3).

2      Rule 14.6(4).

3      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [29].

[14]   Luxe submits that the hopeless case test is clearly met in the present case. Luxe seeks indemnity costs in the amount of $24,523.74, comprising counsel’s costs and disbursements of $19,696.94 (GST excluded) and instructing solicitor’s costs of

$1,828 (GST excluded).4

[15]   Alternatively, Luxe seeks 2B costs and disbursements, with an uplift of 50 per cent. A calculation of costs on a 2B basis is $14,244.74 plus a 50 per cent uplift to that amount would result in a costs award of $ 21,367.11.5

Discussion

[16]   In the decision removing the caveat, I found that the caveatable interest claimed in the caveat was not reasonably arguable.

[17]   When the director of Luxe became aware of the existence of the caveat in January 2025, an immediate application was made to LINZ for it to lapse. The application was without notice but was served on a Pickwick basis. On 14 February 2025 Luxe’s solicitors emailed Mr Jiang, pointing out the deficiencies with the caveat and demanding its removal by 3 pm that day.

[18]   LH did not remove the caveat but pursued its application to sustain the caveat. That application was supported by an affidavit from Mr Jiang. There was no evidence provided in the affidavit of any direct advancement of funds by LH to Luxe.

[19]   LH’s application to sustain the caveat forced Luxe to apply to remove the caveat.

[20]   I noted in my decision that LH appeared to be acting without legal advice. The caveat put significant pressure on Luxe at a time when it was attempting to refinance. While s 146 of the Land Transfer Act 2017 prevents the lodging of a second caveat, I was not satisfied that LH or its directors would not attempt to register a second caveat at a time that would frustrate Luxe’s refinancing efforts.

4      The amounts are GST exclusive as Luxe is GST registered and will claim an input tax credit.

5      In the memorandum filed by the parties, the amount claimed is 14,483.74. This appears to be a calculation error. The allocation for a sealing order or judgment is 0.2 days not 0.3 days.

[21]   On 25 February 2025, LH continued to seek an order that the caveat be sustained and in doing so failed to inform the Court of my decision ordering that the caveat be removed.

[22]   Luxe submits that LH had an ulterior motive for lodging the caveat to extort money from Luxe.

[23]   Luxe relies on Liang v Han, decided by then Associate Judge Gardiner.6 In that decision, indemnity costs were justified because Mr Liang had behaved badly and very unreasonably. Mr Liang had made unsubstantiated allegations of fraud against Mr Han, Mr Han’s counsel and LINZ personnel.7 Mr Liang had lodged a caveat and then applied to sustain it for the sole purpose of obtaining security in relation to his damages claim.8

[24]   It was held that the application was a “hopeless case” from the outset, and it ignored the basic principle that a caveat secures a proprietary interest in the caveated property.9

[25]   The present proceeding is not as clear cut as Liang v Han. As I said in my decision, there is a complex interrelationship between the parties. The caveatable interest was not reasonably arguable but the financial arrangements which lay behind the purchase of the properties may have led LH to genuinely believe that it had grounds to lodge a caveat. That belief, if it existed, was misguided, but I cannot determine on the material that I have that the sole purpose was for an ulterior motive.

[26]   I am not satisfied that this is a case where indemnity costs should be ordered. The issue is somewhat moot in the present case because I am satisfied that increased costs should be ordered.

[27]    In applying to sustain the caveat, LH did not act reasonably, requiring Luxe to apply for its removal. The failure to advise the Court hearing the application that the

6      Liang v Han [2023] NZHC 3404.

7 At [13].

8 At [13].

9 At [14].

caveat had been removed is very concerning. However, that is a matter for the Judge who heard that application.

[28]    This is a case where the unreasonableness really stems from the related application to sustain a caveat that was unsustainable. That action necessitated that Luxe incurred the costs of the current proceedings. I consider that increased costs are justified under r 14.6(d) of the High Court Rules.

[29]   Luxe seeks an uplift of 50 per cent and I agree that is appropriate, but it must be capped at the actual costs.

[30]   I consider that 2B costs and disbursements should be ordered but with an uplift of 50 per cent.

Costs against Kupe Jiang

[31]   Luxe asks that an order is made that Mr Jiang is jointly and severally liable for the costs award made against LH.

[32]   The leading authority on costs orders against a non-party is Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2).10 The Privy Council said:11

Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is “the real party” to the litigation …

[33]   In Official Assignee v Jamieson Venning J said that the principal issue is whether the non-parties should be treated as the real party to the proceeding and therefore potentially liable for costs as a non-party.12 In that case the non-party was ordered to pay costs because “but for” the non-party’s funding of the litigation, it would not have been pursued, and the non-party had a direct financial interest in the proceedings.

10     Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No2) [2004] UKPC 39, [2005] 1 NZLR 145.

11 At [25].

12     Official Assignee v Jamieson [2014] NHZC 875 at [26].

[34]   In Mana Property Trustee Ltd v James Developments Ltd, the Supreme Court, in confirming the Privy Council’s finding in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), said that a non-party:13

… is not at risk of a costs award in other than exceptional circumstances, that is, circumstances outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense.

[35]   In Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), the Privy Council held that the ultimate question in any “exceptional” case is whether in all the circumstances it is just to make the order.14

[36]   Mr Jiang was a director of LH for two different periods: first from 22 August 2024 to 19 December 2024, and second from 22 January 2025 to 19 February 2025.

[37]    I agree that there is strong evidence that Mr Jiang was the driving force behind the caveat and the application to sustain it. The caveat was lodged on 11 November 2024. The caveat provides that the address for service of LH is “C/- Kupe Jiang.” Mr Jiang was a director of LH at that time. Mr Jiang filed an originating application to sustain the caveat on or about 11 February 2025. No solicitor or counsel was listed on the front page of the application.

[38]   A memorandum filed by LH on 14 February 2025 noted Mr Shao as instructing solicitor and Mr Ahmed as counsel. In the memorandum LH sought leave for Mr Jiang to assist Mr Ahmed in a junior role on the basis that Mr Jiang is a final year law student. When counsel for Luxe sought clarification as to LH’s legal representation, Mr Jiang sent an email that is described as abusive, threatening to report her to the Law Society.

[39]    Mr Shao, who was listed as solicitor for LH, advised counsel for Luxe on   17 February 2025 that he was acting as a “post box” and was not in a position to control Mr Jiang’s actions.

13     Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 124, [2011] 2 NZLR 25 at

[10] citing Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 10, at [25](1).

14     Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2), above n 10, at [20].

[40]   It is apparent from these proceedings and the related proceeding to sustain the caveat that Mr Jiang appears to have acted of his own volition and without legal advice at times. Mr Jiang is apparently a law student. He does not hold a practicing certificate. It does not appear that he is acting on legal advice, rather, he is making the decisions for LH in respect of the caveat. Mr Jiang was the person who controlled, and had a personal interest in, the caveat and the application to sustain it. I am satisfied that but for Mr Jiang’s involvement, the caveat would not have been lodged, the application to sustain the caveat would not have been made, and the application for the removal of the caveat would not have been necessary. I accept that Mr Jiang was the driving force behind all of those matters.

[41]   I am also satisfied in this case that it was Mr Jiang’s personal involvement in the matter and personal financial interest in the proceeding that led to the lodging of the caveat and the futile attempt to sustain it.

[42]It is just to make an order that Mr Jiang is liable as a non-party for costs.

Result

[43]LH and Mr Jiang are ordered to pay Luxe costs calculated on a 2B basis of

$14,244.74 plus a 50 per cent uplift to that amount, being $21,367.11 which is slightly below the actual costs.

Wilkinson-Smith J